Legal Mechanisms Of State Intervention In The Scientific And Technological Innovation Market

The relationship between a market and a state has been an eternal theme of the Economic Law study. The response of the relationship between the market hand and the national hand is the watershed of different economic law schools. At the critical moment when the CPC Central Committee and the State Council proposed the establishment of an innovation-oriented country, what kind of response should one of the economic jurists make and think about? This is the academic subject echoed in my mind in recent years. The mainstream doctrine of Economic Law think that market failure arise from market imperfections, the demand to intervene arise from market failure and intervention supply arise from interfering demand. The legal form of the supply of intervention is economic law. The correctness of this theory, as the doctoral student of the Southwest University of Political Science and Law, has been convinced. The question is, to prove the correctness of this doctrine and to develop, but also the needs of supports of many law subdepartments and empirical evidence. However, to find a entry points will not be easy. One day, when I was reading Innovation and System: Rethinking the Economics of U.S. Science and Technology Policy, written by Brett Frischmann, I suddenly have a sense of insight because in the paper Frischmann presents a concept of innovative market and demonstrated the existence of innovation market failures as well as the path to overcome innovation market failures,which in accordance to my thoughts for many years, I suddenly have a firm confidence in writing this article. As we all know, there are many kinds of markets, such as commodity markets, capital market, financial markets, labor market and other markets, since the exsitence of the phenomenon of other markets failure need for state intervention, then the innovation market is no exception. If you will simply apply the theory of market failure and state intervention to innovation market, the academic value of this article is definitely not worth mentioning. I am well aware that to solve the core of this article is to analyze the essence of special causes and manifestations of innovation market failures, while I should put forward and explain the special path and choice of system for government to intervenr innovation market in order to prove the correctness of state intervention theory.The main line of this article is an attempt to use economic law principle to seek the path and approaches of state intervention to correct market failures innovation, and promote prosperity of innovation market. This paper solves three basic questions: First, the establishment of an innovation-oriented country theoretical basis; Second, the main performance of innovation market failure; The third, the basic path for government to intervene innovation market. That is, in the process of the establishment of an innovation-oriented country how the state should intervene in the innovation market , namely the question of the hands of the market and the hands of state intervention should how to interact.In addition to Introduction, the paper is divided into eight chapters: ChapterⅠdefines and describes the concepts and features of innovation and scientific and technological innovation market and classify them, this is the logical starting point for this paper; the second chapter analyzes the theoretical basis for government to intervene innovation market, which is theoretical foundation and bedding of the full text,; Chapter III analyzes the self-help mechanism and failure of scientific and technological innovation market, that is, prior to state intervention, the principles of innovation market automately running, it is the innovation market before the stage of state intervention and real-ran status; then analyze the root causes and performances of innovation market failure, it is the basis of rationality and legitimacy for government to intervene innovation market; Chapterⅳ, from the perspective of comparative law, combs the framework of innovation market intervention system and the evolution of the course in Western developed countries and which reveals that it is indispensable and real probability for government to intervene innovation market; Chapterⅴdiscusses the fundamental principles of state intervention to provide legislative code of conduct in the scientific and technological innovation market; Chapterⅵand Chapterⅶ, respectively, discourse on the two mechanisms of market incentive and national participatory market for state intervention, which is a specific answer about to how to set up an innovation market mechanisms for state intervention, this is the ultimate result of this paper and in which practical significance lies. Chapterⅷdiscusses the issue of anti-monopoly regulation and unfair competitin in the scientific and technlgical innovation market, it is to maintain orderly innovation market competition.Chapter I - innovation and scientific and technlgical innovation market defined. This article holds that innovation is the series of actions from emergence of a new thinking to product design, prototype, production, marketing and market-oriented conducts. It does not include the system of innovation because innovation system is part of the superstructure, is innovation and innovation market belong to an economic base, is the premise and basis points to determine the legitimacy of state intervention or not. Innovation has characters as public goods, any unforeseen circumstances, and the dynamic and complex nature of incentives. According to different standards, innovation can be divided into basic research innovation and application research innovation, scientific innovation and technological innovation, concept innovation, theoretical innovation, invention innovation and experimental innovation, natural sciences innovation, social sciences innovation and cross-type scientific innovation. Such research could help to play a theory Typologies interpretative function. The author believes that innovation market refers to innovation in knowledge, including all inputs and outputs, supply and demand of the market, including not only a competitive market of private technological innovation, but also basic scientific innovation market with the public goods nature. In terms of innovation market there is a monopoly to restrain competition, so there must also be the implementation of anti-monopoly law in innovation market.Chapter II - the theoretical basis for state to intervene scientific and technlgical innovation market. This chapter take innovation externalities, public goods and imperfect competition as the three major theory of state intervention in innovation market. Externality theory holds the result of these differences between innovation and traditional property regimes is that the universe of externalities we can safely ignore is quite a bit narrower in the innovation context than it is with traditional property. On the supply side, inventors do not need to capture the full social value of their inventions in order to have sufficient incentive to create. Society needs merely to give them enough incentive to cover the fixed costs of creation that their imitators will not face. We do not need, therefore, to internalize all the benefits of innovation--just enough benefits to encourage the optimal level of innovation. On the demand side, Users are not necessarily optimal purchasers of access, because if they are productive users--as will often be the case with infrastructure--they do not themselves capture the full social value of their use. Their private willingness to pay accordingly understates the social value of their use. the problem here is that demand is reduced, in the sense that the demand manifested by productive users falls short of social demand. Therefore, the state correction system of innovation market failure must be suitable for externality characteristics of innovation, namely the establishment of Category intervention mode: on the one hand, government may take grant to basic and noncommercial researches; on the other hand we must establish the mixed regime of property and commons of innovation for the commercial application.Public goods theory suggests that the production of all types of intellectual resources is a cumulative process. Certain intellectual resources accumulated in the course of these are more general and basic, these general and basic intellectual resources are known as the intellectual infrastructure, also known as basic research. Basic research are public goods rather than private goods, which means that they are non-competitive consumer goods, do not have natural scarcity. Of personal belongings, the market mechanism usually play very good results in the supply and demand levels as long as the market is competitive. Of public goods, the market mechanism in the supply and demand levels may malfunction. These twocharacteristics of Non-exclusive and non-competitive led to the indivisibility of consumption of public goods, be difficult to clear property rights, can not make use of the market principle to provide public goods. In the case of market failure, public goods can only be provided by the Government.Imperfect competition theory suggests that the market is in a state of imperfect competition, if a monopoly, it will reduce output, to provide low-quality products and services, in order to gain over-monopoly profits at the same time, as a result of monopoly leading to misconduct the allocation of resources will lead to net loss of social welfare. If being dominated by a monopolistic state, the few companies in the market can work together to determine their price or output, to carve up the market between them, or to develop other production decisions. Imperfect competition state in innovation market, in particular acts of monopolization and enterprises cartel, will stifle innovation and the vitality of the market in the way of technological progress, and eventually lead to decline in production efficiency and consumer welfare net loss. Therefore, the state must intervene in innovation market to prevent monopolies and unfair competition.Chapter III - the original self-help mechanism and failure of an scientific and technlgical innovation market. Original innovation market refers to the original, no intervening innovation market. Original innovation market self-help mechanism can automatically play the role of innovation market umbrella in order to maintain the normal operation of market innovation. Non-intervention in the innovation market, there are two self-help mechanism to prevent the unauthorized use: the market leader in time and access barriers. Firms use lead time advantages when they take advantage of being first to develop an innovation and the resulting lag time it takes for imitators to catch up on the learning curve. During this time, innovators will transact at the monopoly price, and made the first of future market share. The market-leading time firms are usually able to generate sufficient returns for their investments, the lead interests of such a market will generate sufficient innovation incentives, which is a fact that there is an incentive mechanism. Long-term advantages of lead time often leads to the establishment of market dominant position, and was used to create barriers to market access. Enterprises to implement the purpose of market access barriers, aimed at increasing the free-rider costs and maintain market dominance. These obstacles include a mechanism to prevent the reproduction of technical design, selectively release innovation, frequently updated products, advertising and merchandise sales, as well as access to necessary resources and control of distribution channels. Only the study of stranded costs is also to prevent potential competitors from entering new markets. Many empirical studies point to a self-help mechanism to prevent the appropriation results. According to the research and development of senior managers carried out a full investigation, they believe in the prevention of appropriation, these self-help mechanism are better than the intellectual property rights. However, self-help mechanisms (such as market access barriers and lead time) can only prevent a portion of the free-riding behavior of innovative competitors, and can not protect all innovation activities.Scientific and technlgical innovation markets are like other markets such as commodity markets, capital markets, information markets, there is a phenomenon of failure. The root causes of innovation market failure are as follows: First, the innovative attributes of public goods determines that some types of innovation can not be supply through the market mechanism, government intervention must be taken to correct innovation market failure; Secondly, the existence of conventional production risks in the innovation market are barriers to innovate effectively, production risks include the standard risks present in any investment transaction, namely the uncontrollable risk of success and the controllable risk of effort.; Third, appropriation risk may deter private investors from socially desirable projects, if their risk preferences differ from that of the public, the ease with which an innovation can be imitated or copied enhances the exclusion problem; Fourth, information asymmetry is inevitable in innovation market, because the collection of innovative market information is more complex than that of the physical commodity markets, is usually full of risks and challenges, because innovation is often made in a confidential manner. In addition, patent information is incomplete indicator of innovation, because of domestic patent applications pending is not disclosed to the public. Therefore, the innovation market information is often co-existence of the authenticity and fraud, the system of correcting innovation market failures will be more difficult to choose. Fifth, innovative process market failure (IPMF) occurs when the dynamic nature of the innovative process and its uncertain progression press investors toward more applied research than is socially desirable. IPMF has two defining characteristics: (1) dynamic dependence, i.e., future innovative progress depends on the existing state, and (2) prospective uncertainty, i.e., risks, time horizons, expenditures, and spillovers are uncertain as estimated ex ante. Limited public and private investment resources require a careful balance between applied and basic innovation projects over time to ensure efficient progress. However, in the face of prospective uncertainty, investors skew innovation investment from the socially optimal distribution between applied and basic research. While downstream uses are not rivalrous in the technical sense (i.e., there is no risk of congestion because basic research is a nonrival input), downstream users may compete with each other to develop and commercialize the research, and thus may demand exclusive licenses. This competitive dynamic may introduce rivalry in consumption and drive owners to favor uses reasonably expected to generate appropriable returns at the expense of uses more likely to generate positive externalities.In a sense, if the social value of the path is still in a state of latent and undeveloped, there may be abundance of social opportunity cost to impede progress. This constitutes a special type of market failure, that is,"innovative process market failure."The harms of Innovation market failures is enormous, and it led to incentives dysfunction of the innovation market and a target to maximize the efficiency of innovation can not be achieved, thereby triggering the Sub-Optimal Innovation and"inventive tipping", thus ultimately detract from consumer welfare.Chapter IV– the legal mechanisms for government to intervene in the foreign scientific and technological innovation market. This chapter focuses on legal mechanisms for states to intervene in scientific and technological innovations market of the United States and the European Union,. The U.S. legal mechanism of government intervention in science and technology innovation market is characterized by the following features:the systematic state intervention legislation in scientific and technological innovation market,the perfect system of intellectual property rights,tax incentives to encourage scientific and technological innovation, a clear property rights mechanism of collaborative research, the strong government-funded system of scientific and technological innovation . The basic legal system features of EU intervention in science and technology innovation market include:the harmonious and unified science and technology development policies, possession of the Basic Law to intervene in national science and technology innovation market,explicitly proportion of R&D investment prescribed through states legislation,the widespread use of tax incentives, the use of government procurement policy to incent innovation, and to promote clustering and cooperative innovation. In short,having looked at the intervention policy of the developed Western countries in the scientific and technological innovations market , we found that has the following characteristics:firstly, take the constitution as the legislative basis for state intervention in scientific and technological innovation market;secondly; in a way of legislation to ensure the proportion of government financial assistance in scientific and technological innovation ; thirdly, to encourage private investment in scientific and technological innovation;the fourth is to use preferential tax policies to stimulate scientific and technological innovation;the fifth is to use government procurement contracts to solve scientific and technological innovation needs.Chapterⅴ- the basic principles of State intervention in scientific and technlgical innovation market. China's overall policy objectives of scientific and technological development are: to take the road of independent innovation with Chinese characteristics, building an innovation-oriented country. China's basic principles of state intervention in innovation market must be consistent with the country's major strategic decision-making. The basic principles of State intervention in innovation market must also be consistent with the goals of legislation, the legislative goals should be reflected in the basic principle. This article holds that the main objectives of state intervention in innovation market are to flourish this market. The basic principles of state intervention in innovation market are the fundamental guidelines of governments to intervene in the process of innovation, these are legal norms starting point and basis of formulation, interpretation, implementation and study of state intervention in the innovative market. In particular, include the following three basic principles: First, a principle of innovators to obtain adequate return; Second is a principle to safeguard of competition order in innovation market; The third is a principles of government to moderately intervene in innovation market. Chapterⅵ- the market incentive intervention mechanism. Market incentive-based intervention mechanism and its running mechanism is through property incentives and tax incentives to stimulate enthusiasm and creativity of the main body of market, and guide the main body of market in line with the national strategy to engage in innovative activities to promote prosperity of innovation market. Market incentive-based intervention mechanism will apply mainly to the innovation of application research. Intellectual property rights is an important market incentive-based intervention, through the protection of authors and inventors for their works and inventions in a certain period of time to enjoy the exclusive right to promote the development of science and art. By improving the exclusive, intellectual property rights system is able to amend the original innovation market, thereby reducing the risk of appropriation, while as a market's innovative engine. Intellectual property as a form of government intervention aims at rectifying the inherent exclusive market failure in an innovation market. Tax incentives are another important market incentive intervention. As the intellectual property system, the tax incentives is an ideal model through the provision of indirect subsidies to the private sector, encouraging private sector innovation, it has the potential to improve market efficiency. The main objective of tax incentives for innovation is that if the enterprises increase research investment, by allowing companies to reduce the tax risks to influence their investment decisions prior acts. Therefore, it can reduce research costs, thus reducing the risk of unsuccessful projects. Because both tax incentives and intellectual property are indirect subsidies that lessen the aggregate risk of research investments for firms. Therefore, compared to direct government subsidies, the intellectual property rights and tax incentives are less government intervention. They are indirect subsidies given to the private sector. The use of intellectual property rights and tax incentives is to attract private resources to enter certain areas of commercial research, but the type of commercial research must meet certain qualifications. Although tax incentives and government subsidies is the government's interest concessions, but there are distinct differences between them, namely the extent and form of government intervention are different. Grants direct lump sum investments while tax rewards are contingent upon positive income by the firm. The choice between grants and tax incentives for subsidizing basic research depends on the applications predicted ex ante and on which decision maker is best suited, e.g., possesses superior information, skills, etc. Tax incentives leave much of the same project-specific selection to private firms but cabined by the qualification criteria prescribed by the tax provision. If the research is expected to further a commercial end then tax incentives may be more effective than grants because final project selection is left to the best informed investor, the firm.Chapterⅶ- the national participatory intervention mechanism. National participatory intervention mechanism refers to a intervention mechanism of states direct investment on a innovation market, it is mainly applied to basic research and national defense science and technology innovation activities, because these areas have the public goods nature of innovation. The merits of this intervention mechanism is directly able to make up for inadequate supply of the output of innovation, government can take advantage of organizing public goods supply-side, both national participancy and market incentives are complementary, and jointly promote prosperity of innovation market. According to different ways of government to participate in an innovation market, national participatory intervention mechanism mainly include four forms of government funding, government procurement, cooperative research and development agreement and award for innovation.. Government funding as a system to correct innovation market failure has obvious legitimacy, because no suitable alternative mechanism. If you need the supply of public goods, then the government must support the production of public goods innovation. As for the private sector are reluctant to invest in innovative projects, it is has no doubt the legitimacy for government to fund. Government funding is provided in advance, rather than depending on the success of the project is expected to be. Due to limited resources, the government must choose a number of basic research projects to be funded, at the same time, the Government must also allocate funds to a variety of production of public goods applications. Similar to the system of government funding, government procurement is another intervention system of innovative market. Government procurement allow the government to allocate funds for the purchase of a specific use public goods or services, while allowing companies bidding in government procurement contracts. Government procurement uses a agency structure differring from government funding, but more obvious difference is that government procurement of goods is "paid", related to a problem of transaction costs and the amount of information in advance. According to the traditional principle of public goods, the legitimacy of government procurement contracts represent a function of correcting consumer market failure. Cooperative research has a function of correction process of innovation market failure. As an institutional mechanism, CRADAs bridge the gap between government-based and market-based institutions and facilitate technology transfer and the development of "dual-use" technologies. In addition, the co-operative research can play a collective efforts to overcome technical difficulties to avoid inefficient duplication of behavior.Chapterⅷ- anti-monopoly and anti-unfair competition regulation in an scientific and technlgocal innovation market. Competition is the driving force for technological innovation, innovation market monopolistic behavior will only result in less motivation of innovation for monopolies, and would hinder competitors to innovate, stifle innovating and ultimately harm the overall welfare of society. Therefore, innovative markets must be anti-monopoly law enforcement. In order to facilitate the law enforcement agencies to enforce anti-monopoly law in the innovation market, we must establish an appropriate set of identified innovation market monopolistic behavior of the identified standards. Specifically, includes two aspects: first, to find the same innovation market, that is, that the different enterprises in the same innovation market will be a competitive relationship. The article developed a five-step methodology to identify an innovation market. The five steps of this methodology are:: 1, identification of competitive R&D projects; 2, Identify Alternative Sources of R&D; 3,Evaluate Competition From Downstream Products; 4, Increase in Competition in R&D; 5, Assess R&D Efficiencies. Second, wheather innovation in the same market can constituted a monopoly enterprise, it can be seen from two real conditions to determine: first, to see whether there ia a monopoly of relevant product research and development market; Second, wheather it can set up a watch on market access barriers. In addition, there is unfair competition in the scientific and technological innovation market, mainly as a violation of trade secrets, confusion, appropriation , parasitic competition and acts of slander goodwill. As unfair competition in the science and technology research and development market is mainly to take actions against the ongoing research and development activities, and therefore advance prevention is more effective than the post-relief in the administrative accountability , the original punish ways such as the fines, confiscation of illegal income, etc. are too simple , it is difficult to achieve the desired results. I recommend that the establishment of early warning mechanism of anti-unfair competition law in R&D market is very important to prevent possible accidents.